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ESA submit joint letter to European Commission on cross-selling of financial products

On 26 January 2016, the European Supervisory Authorities (ESAs), comprised of EIOPA, ESMA and the EBA, wrote a letter to the European Commission raising concerns about the regulation of crossselling practices across the investment, banking and insurance sectors.

Under MiFID II, ESMA was required to produce “guidelines for the supervision and assessment of cross-selling practices” in cooperation with EIOPA and EBA by 3 January 2016. The ESAs agreed that to ensure the effectiveness of such guidelines, they should apply equally across all three sectors and not be limited by reference to MiFID II. In support of this, the letter refers to the problems that arose through cross-selling between financial products and payment protection insurance which had such a detrimental impact on consumers and the reputation of the financial services industry as a whole.

However, owing to differences in the underlying legislation governing each of the three sectors, the ESAs have been unable to produce a combined set of guidelines. In order to meet its specific legislative mandate, ESMA published investment-sector only guidelines on crossselling on 22 December 2015. The letter highlights the inadequacy of this approach and emphasises the need for consistent regulation across all three sectors to protect consumers, facilitate financial institutions’ compliance with cross-selling guidelines and enable effective regulation by supervisory authorities.

Consequently, the ESAs have requested the Commission review and address the Level-1 legislative issues in order to achieve the preferred single set of guidelines. They proposed the Commission look at this in the context of its recently published Green Paper on Retail Financial Services in the Banking and Insurance Sectors and/ or its Call for Evidence on the regulatory framework in financial services.